Through its operating subsidiary Montpelier Reinsurance Ltd. is a provider of global property and casualty reinsurance and insurance products.
BATS data provided in real-time. NYSE, NASDAQ and AMEX data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates and Analyst Ratings provided by Zacks.
SEC Filings and Insider Transactions provided by Edgar Online.
Powered and implemented by Interactive Data Managed Solutions. Terms & Conditions
RSS Headlines
Fool UK
Recs
Why I like Montpelier Re:
1) No options. Stock based compensation is all RSUs, making for better alignment of interests with shareholders. Still far too few companies like this.
2) A bargain. Priced at under book. I expect price to exceed 1.5 x book after we get through this recession (depression?). Further, I expect book value to improve from here, probably even with confirmation of that later today.
3) Diversifying risk. I like the broadening of coverage types and geography. New London platform will take time to rev up, but should smooth out results over time.
4) Firming reinsurance prices. I hear reinsurance prices are on a firming trend in recent months. Makes sense with capital tight in the current economic environment.
5) Small and under-followed. Lets us small guys capitalize on our advantage of not needing consensus or volume (though volume seems to be here anyway).
Concerns:
1) Hurricanes and terrorism. These guys insure some nasty stuff.
2) CEO Harris. He's way too new. But, I like that the last CEO is staying on as Chairman for a bit.
3) Am I wrong about book value improvement?
Current news is good regarding concern #3, book value improvement. Q1 bv was just reported at 16.37, an improvement of 2.7% over last quarter's bv of 15.94.I currently value this company at $21 / share, and if Q2 goes this well, I'll increase that value.
Q2 went very well, with over 10% improvement in book value in the quarter. I'm raising my estimate of intrinsic value to $25 / share. But, I don't expect the market to agree with me until the company's underwriting is tested with a good hurricane.
Q3 was another very solid quarter. BV/S is now at $19.78, and ROE for the quarter was 8.9%. We have had two high growth quarters in a row, and it is good to have them to balance out the occasional bad quarter.
The company's investment strategy has been tweaked yet more to the conservative side, and there is a new Chief Investment Officer to learn about. It does not seem that reinsurance pricing can go any higher, and may well start to soften. Growth will come from continuing expansion in non-catastrophe lines.
Using expectations of a trend for ROE of 14% annually (which we look like we will blow past this year, with a high likelihood of a beat over the two year period including 2010), and assigning an 11% discount rate, I'm estimating value at $25 / share. That's unchanged from my previous estimate. Things are going very well -- I just want more of a track record before projecting higher.
Further, considering my #1 concern, hurricanes and terrorism, while we have certainly benefited from a quiet year, the company is also making its own luck. Growth in less risky lines has been good while catastrophe lines have been held pretty flat.
And, regarding concern #2, not only is CEO Harris doing well so far, but the old CEO has now agreed to stay as Chairman for more than just a bit.
All 3 of my concerns have had favorable developments. I need to review the big picture with an eye to what else to worry about.
I have been waiting for this one for years now. In my consideration I went searching for commentary again. A little late, I just read your February write-up. Well done. Just wanted to say thanks for the research.
jsikorsk, thanks for the kind words.
We should get news on the 1st quarter tomorrow (Tuesday). We already know they expect to lose up to $100 million on the Chile earthquake. They may report a small loss, but then again they made more than $100 million in 3 out of 4 quarters in 2009.